Cyclermate Report

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Ngo Mai Anh Hoang My Hanh Dinh Ngoc Huyen Nguyen Hai Ly Nguyen Ha Thu Nguyen Son Tung

1. Introduction 2. Liquidity and Capital structure
2.2. 2.3. 2.4. 2.5. 3.1. 3.2. SWOT Analysis Liquidity Matters Capital Structure Matters Short-term options

3 4

3. Production Methods
SWOT Analysis Short-term Options


4. Human Relations 5. Investigation for Lone-term Survival and Profitability 6. Conclusion 7. Reference 8. Appendix

10 12 13 14 15


1. Introduction
Cyclermate Ltd is a small company producing bicycles in UK. The firm was set up by Lewis Llewellyn and Dai Armstrong, the two close friends in a local cycle touring club. They produce traditional upright cycle, which imitate the 1940’s and 1950’s. In 1990s, the company expanded to meet the demand and they bought a 15,000 square feet warehouse with 2,000 square feet of office accommodation. The high quality hand- made bikes brought them good reputation and maintained high sales though they did not advertise much. However in 2010 the company has trouble as the sales decrease and the demand fell in spite of lower price. Some customers even complained about quality of the product because they got accidents due to front brake. We are a group of consultants and we are preparing this report that will give Cyclermate’s banker an objective view about this company. Although at the moment they are having overdraft and some difficulties in selling products, we are here to make the bank see opportunities of this company and continue investing in it.


2. Liquidity and Capital Structure
2.1. SWOT Analysis  Strengths
  Cyclermate has a long establishment time and reputation in producing traditional bike. The company has asset of a large piece of land worth £ 208,000 (included £ 48,000 of factory and £ 160,000 of unused land).

 Weaknesses
  Cyclermate has very few current assets and more non-current asset. This reduces the liquidity of money. There is a great liability that is in the form of bank overdrafts. Costs are rising while price per unit decrease to encourage customers resulting in reduce in revenue.

 Opportunities
  A fixed amount of bike is ensured to be sold with Cyclermate’s reputation Sales may increase with environment protection trend There is a chance of getting investment from Dai’s cousin

 

 Threats
Banks do not allow anymore overdraft, thus there is a possibility of bankruptcy With competition from other companies and e-commerce, together with bad reputation from accidents caused by Cyclermate’s bikes. sales may continue to remain low

Linda Llewellyn – one of three shareholders wants to withdraw money from company business


Liquidity Matters
The current ratio measures whether or not a firm has enough resources to pay over its debt over

the next 12 months. Current ratio is calculated as follow.

In this case, current ratio is 1.85 which means that for every dollar the company owes in the short term it has £1.85 available in assets that can be converted to cash in the short term. Therefore, it can be understood that current liabilities are still in control. However, the ratio is a little bit high so it reflects that the company is not efficiently using its current assets or its short-term financing facilities. This may also indicate problems in working capital management.


Quick ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. The higher the ratio, the greater the company’s liquidity is.

(Quick Assets = Current Assets – Inventory)

Here, Cyclermate has a quick ratio of 1.15 which means Cyclermate has enough quick assets to convert to cash in order to pay current liabilities if necessary. Cash ratio measures a company’s ability to immediately use cash to pay its...
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